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S.1693 - A bill to amend the Internal Revenue Code of 1986 to prevent the avoidance of tax by insurance companies through reinsurance with non-taxed affiliates.
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SECTION 1. PREVENTION OF AVOIDANCE OF TAX THROUGH REINSURANCE WITH NON-TAXED AFFILIATES.
‘SEC. 849. SPECIAL RULES FOR REINSURANCE OF NON-LIFE CONTRACTS WITH NON-TAXED AFFILIATES.
‘(a) In General- The taxable income under section 831(a) or the life insurance company taxable income under section 801(b) (as the case may be) of an insurance company shall be determined by not taking into account--CommentsClose CommentsPermalink
‘(2) any additional amount paid by such insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid, to the extent such additional amount is properly allocable to such non-taxed reinsurance premium, andCommentsClose CommentsPermalink
‘(3) any return premium, ceding commission, reinsurance recovered, or other amount received by such insurance company with respect to the reinsurance for which such non-taxed reinsurance premium is paid, to the extent such return premium, ceding commission, reinsurance recovered, or other amount is properly allocable to such non-taxed reinsurance premium.CommentsClose CommentsPermalink
‘(1) IN GENERAL- The term ‘non-taxed reinsurance premium’ means any reinsurance premium paid directly or indirectly to an affiliated corporation with respect to reinsurance of risks (other than excepted risks), to the extent that the income attributable to the premium is not subject to tax under this subtitle (either as the income of the affiliated corporation or as amounts included in gross income by a United States shareholder under section 951).CommentsClose CommentsPermalink
‘(c) Affiliated Corporations- For purposes of this section, a corporation shall be treated as affiliated with an insurance company if both corporations would be members of the same controlled group of corporations (as defined in section 1563(a)) if section 1563 were applied--CommentsClose CommentsPermalink
‘(B) EXCEPTION FROM EXCISE TAX- The tax imposed by section 4371 shall not apply with respect to any income treated as effectively connected with the conduct of a trade or business in the United States under paragraph (1).CommentsClose CommentsPermalink
‘(C) TAXATION UNDER THIS SUBCHAPTER- Such income shall be subject to tax under this subchapter to the same extent and in the same manner as if such income were the income of a domestic insurance company.CommentsClose CommentsPermalink
The Secretary may issue regulations or other guidance which provide that related items of specified reinsurance income may be aggregated for purposes of applying clause (ii).CommentsClose CommentsPermalink
‘(3) SPECIFIED AFFILIATED CORPORATION- For purposes of this subsection, the term ‘specified affiliated corporation’ means any affiliated corporation which is a foreign corporation and which meets such requirements as the Secretary shall prescribe to ensure that tax on the specified reinsurance income of such corporation is properly determined and paid.CommentsClose CommentsPermalink
‘(4) SPECIFIED REINSURANCE INCOME- For purposes of this paragraph, the term ‘specified reinsurance income’ means all income of a specified affiliated corporation which is attributable to reinsurance with respect to which subsection (a) would (but for the election under this subsection) apply.CommentsClose CommentsPermalink
‘(e) Regulations- The Secretary shall prescribe such regulations or other guidance as may be appropriate to carry out, or to prevent the avoidance of the purposes of, this section, including regulations or other guidance which provide for the application of this section to alternative reinsurance transactions, fronting transactions, conduit and reciprocal transactions, and any economically equivalent transactions.’.CommentsClose CommentsPermalink